MortgagesDec 20 2022

Govt extends mortgage guarantee scheme by a year

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Govt extends mortgage guarantee scheme by a year
Photographer: Chris Ratcliffe/Bloomberg

The government’s mortgage guarantee scheme is to be extended by one year and will now remain in place until December 2023, in a bid to support buyers with 5 per cent deposits onto the property ladder.

The policy change was confirmed yesterday (December 19) by HM Treasury following reports by The Times at the weekend.

Launched in April 2021, the scheme offers lenders the financial guarantees they need to cover the other 95 per cent of the mortgage on a house worth up to £600,000. 

In reality it is merely a sticking plaster over an amputationMartin Stewart, London Money

To date, the scheme has supported 24,000 households - 85 per cent being first time buyers.

Commenting on the announcement, chief secretary to the Treasury, John Glen, said it is right that the scheme continues given “today’s challenging economic conditions”.

“Extending this scheme means thousands more have the chance to benefit, and supports the market as we navigate through these difficult times,’’ he added.

During the Covid-19 pandemic, lenders reduced the availability of high LTV mortgage products as their appetite for risk decreased. 

Products were further cut following September’s “mini” Budget. 

According to Moneyfacts, at the beginning of this week there were 130 95 per cent mortgage products available on the market compared to 274 at the beginning of September. 

This represents a significant drop on the same period last year, when there were 353 95 per cent products available on December 1 2021.

Broker response

Reaction from mortgage brokers to the scheme extension has been positive. 

Moneybox head of mortgages, Felicity Holloway said it comes as welcome news to first-time buyers. 

“Government schemes such as this and the Lifetime Isa are sorely needed boosters to help young people get on the property ladder,” she said.

“Aspiring homeowners have had a lot to deal with in the last six months in particular, with significant volatility in the mortgage market following the 'mini' Budget. Withdrawing the scheme now would add uncertainty to the housing market at a time when clarity and stability is needed.”

Holloway also noted that the scheme has allowed lenders to keep deals on the market for lower deposit amounts.

“Mortgage rates have been low and stable for most of the last decade but 2022 has shown us that the unexpected can happen. It is crucial that homeowners do not put themselves in uncomfortable and unaffordable positions should the volatility in the mortgage market continue into 2023,” she added.

Likewise, the announcement was welcomed by London Money director, Martin Stewart, albeit with some scepticism.

“Extending the scheme does make sense and goes some way to repairing the damage to consumer confidence caused by the fiscal disaster back in September.